HMRC stepping up scrutiny of sports and fitness sector

Sport and fitness clubs in the UK are coming under increasing scrutiny from HM Revenue & Customs (HMRC) for their compliance with National Minimum Wage (NMW) legislation and their treatment of workers more generally, an employment law expert has said.16 Mar 2018

Joe McMorrow of Pinsent Masons, the law firm behind Out-Law.com, was commenting after a number of businesses in the sports and fitness sector were listed among 179 employers 'named and shamed' for underpaying workers earlier this month.

According to the government, the employers underpaid more than 9,000 minimum wage workers by £1.1 million. As well as being forced to complete back-payments for 9,200 workers, the employers were fined a total of £1.3m. The action came ahead of the next rate rise due on 1 April 2018, when the National Living Wage will go up from £7.50 to £7.83 per hour.

Since the 'naming and shaming' scheme was introduced in 2013, more than £9m in back-pay for about 67,000 workers has been recovered, and 1,700 employers have been fined a total of £6.3m. The government has committed £25.3 million for minimum wage enforcement in 2017/18 and launched a £1.7m awareness campaign for workers earlier this year.

Employers found to have been underpaying workers face penalties of up to 200% of the arrears owed, up to a cap of £20,000 per worker. HMRC acts as regulator.

McMorrow said HMRC is "flexing its muscles" on employee issues in the sport and fitness sector.

The topic of NMW compliance in the sector has been of particular interest to HMRC. It can be a source of embarrassment for sports clubs who may otherwise be associated with paying high salaries to players, McMorrow said.

"The risk areas are especially in relation to arrangements such as trial players, academy players, volunteers, and interns," McMorrow said.

A further issue for the sector, and fitness clubs in particular, that is on the horizon are questions over the employment status of people working in their centres, McMorrow said.

"Gym chains, for example, often consider gym instructors and personal trainers as being self-employed, however there has been increasing scrutiny over whether people working in the so-called 'gig economy' are considered to be employees or workers, with employees entitled to greater rights and protections under law," he said. "There have already been a number of cases come before the courts on this question, including one involving Uber, and fitness centres are also coming in for scrutiny too."

Late last year, the Work and Pensions Committee at the UK parliament wrote to Gym Group questioning its contracts with its personal trainers.

At the time of one of its letters, Frank Field MP, chair of the committee, said: "You can call your workers 'self-employed' as many times as you like: it does not make it so. The contract, and a raft of emails from management we have also seen, show the multiple ways that Gym Group's personal trainers are expected to behave as employees - yet they get none of the benefits, entitlements or security that should come with that. The company really is stretching the designation of self-employment to breaking point and beyond."

Gym Group notified the committee that it would update its business model so that some of its personal trainers would benefit from employment rights and protections.

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